Tax simplification and government coffers

INTEREST is growing around the outcome of the project underway by the Office of Tax Simplification, but a recent speech by the exchequer secretary suggests that its work is far from just about making the tax system simpler.

David Gauke’s comments to the Financial Executive Network Group yesterday seemed almost banal, starting as it does by rubbishing the past. All government speeches begin this way – it’s like a ministerial reflex.
But then Gauke (pictured) said this: “We will create a tax system with a broader base, and lower rates.”

Interesting that. Corporation tax is, of course, coming down. Gauke is obviously putting to one side the hike in VAT and the lift in capital gains tax relief.
But more importantly it means that more will pay, but at reduced rates. Apparently.
Which I think means Gauke is in a tight spot. The economy is not well.

The one thing he doesn’t want on his hands is a simplification project that, through taxing more people and generating more revenues for the exchequer, actually discourages business activity.

At a time when the austerity measures are about to really bite, this could help exacerbate things unpleasantly.

And this is important because in some sense the government is beginning to look vulnerable to the argument that it is not doing enough to promote business. Labour is making that claim vociferously but this week also saw outgoing CBI chief Richard Lambert pull no punches in making the same point.

Gauke is clearly concerned about tax revenues. The government is desperate for them to help reduce the deficit. And deficit reduction is the government’s mantra. But it doesn’t seem to me that it’s the OTS’ job is to help maximise the tax take. It’s remit has quite a different spirit about it. Gauke will no doubt watch very carefully when the OTS reports.